In re:

UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF DELAWARE
Chapter 11
CORDILLERA GOLF CLUB, LLC/ Case No.12-11893 (CSS)
Debtor. Re: Docket Nos. 6 and 42
Hearing Date: Jnly 27,2012@ 1:00 p.m.
LIMITED OBJECTION OF THE OFFICIAL COMMITTEE OF
UNSECURED CREDITORS TO DEBTOR'S MOTION FOR ORDER
PURSUANT TO SECTIONS lOS( a), 363(b), 541, AND 507(a)(8) OF THE
BANKRUPTCY CODE AUTHORIZING (I) PAYMENT OF CERTAIN
PREPETITION TAXES AND FEES, AND (II) FINANCIAL INSTITUTIONS
TO PROCESS AND CASH RELATED CHECKS AND TRANSFERS
The Official Committee of Unsecured Creditors ("Committee") appointed in the above
captioned, Chapter 11 bankruptcy case of Cordillera Golf Club, LLC ("Debtor"), by and through
its (proposed) undersigned counsel, respectfully files this Limited Objection (this "Objection") to
the Debtor's Motion for an Order Pursuant to Sections lOS( a), 363(b), 541, and 507(a)(8) of the
Bankruptcy Code Authorizing (I) Payment of Certain Prepetition Taxes and Fees, and
(II) Financial Institutions to Process and Cash Related Checks and Transfers [Docket No. 6]
("Motion"), and in support, would respectfully show this Court as follows:
BACKGROUND
1. On June 26, 2012 ("Petition Date"), the Debtor filed its voluntary for relief under
Chapter 11 of the United States Bankruptcy Code, 11 U.S.C. 101, et seq. (the "Bankruptcy
Code"), thereby initiating the above-captioned case with this Court (the "Bankruptcy Case").
The Debtor remains in control of its business and affairs as a debtor-in-possession pursuant to
sections 1107 and 1108 of the Bankruptcy Code.
The Debtor in this chapter II case, and the last four digits of its employer tax identification number, is:
XX-XXXI317. The corporate headquarters address for the Debtor is 97 Main Street, Suite E202, Edwards,
co 81632.
615483.1 7/13/12
2. On July6, 2012, the United States Trustee filed its Notice of Appointment of
Committee of Unsecured Creditors [Docket No. 86], thereby forming the Committee.
3. The Debtor is the owner and operator of "The Club at Cordillera" (the "Club"),
located in Edwards Colorado in Eagle County. The Club includes three 18-hole golf courses, a
short course, three tennis centers, fitness facilities, five indoor and outdoor pools, a summer
camp and clubhouse for children, and riding, hiking and cross-country ski trails. See Declaration
of Daniel L. Fitchett, Jr. in Support of Chapter 11 Petitions and First Day Relief ("Fitchett
Declaration"), 'j7.
4. The Club is located within the Cordillera residential community in Edwards,
Colorado, and derives revenues through fees and dues related to Club memberships and
marketed to community residents and others. Fitchett Declaration, 'j'j5, 6, 8-12.
5. On the Petition Date, the Debtor filed with this Court its Motion, seeking this
Court's authorization or order: (i) for the Debtor to pay "certain," "miscellaneous" taxes and
license fees (collectively, the "Assessments") that have accrued pre-petition but remain unpaid
(including payments that may have been "rejected, lost or not received in full"; (ii) for the
Debtor to pay Assessments resulting from any audits of the Debtor conducted by governmental
authorities with respect to same; (iii) for the Debtor to pay Assessments incurred from sales and
services provided pre-petition, but coming due post-petition; and (iv) directing the Debtor's
banks and financial institutions to honor and process payments for Assessments made pre-
petition but which have not cleared as ofthe Petition Date. Motion, at '1'1 6, 7.
6. With respect to such requests, the Debtor further estimates and discloses that
requested payments for Assessments will not exceed approximately $475,000, comprised in
large part by a an alleged real estate tax in the amount of approximately $431,000. Motion, at
615483.1 7/13/12
2 I
I-
I
'If 8. Beyond this, the Motion does not disclose any authorities, licenses, permits and/or fees in
question, or the amounts applicable to them.
7. The Debtor contends that its failure to pay the Assessments could have a material
adverse impact on the Debtor's business and estate, and supports its request on the bases that:
(i) authorities may institute audits if the Assessments are not paid, which would create
unnecessary distractions and expenses for the Debtor; (ii) authorities may suspend the Debtor's
operations, file liens, seek to lift the automatic stay, seek payment from the Debtor's officers and
directors, and pursue other remedies that "will materially and immediately" harm the estate; and
(iii) some of the Assessment funds constitute trust fund taxes that are held in trust for the benefit
of authorities, and accordingly, are not property of the estate. Motion, at'\['\[ 8, 9.
8. In consideration of the foregoing, the Debtor contends that this Court should grant
the Debtor the discretion to pay the Assessments, because: (i) "a portion" of the Assessments
"may" be entitled to priority status; (ii) the foregoing trust fund issue would prevent the Debtor
from otherwise using the trust funds in any event; (iii) under sections 105 and 363 of the
Bankruptcy Code, this court can authorize the Debtor to use property of the estate outside of the
ordinary course of business as may be appropriate or necessary, and the necessity of payment
doctrine applies to the Assessments; and (iv) "some" states hold directors and officers personally
liable for such Assessments in certain circumstances, and such a possibility would distract from
their duties to the Debtor. Motion,'\['\[ 10-15.
9. On June 27, 2012, this Court entered its Interim Order granting the Motion in part
[Docket No. 42] ("Interim Order"). The Interim Order permits the Debtor to pay Assessments in
the amount of as much as $44,000 on an interim basis, and up to $475,000 if no party objects to
615483.1 7113/12
3
the Motion prior to July 13, 2012, and setting a final hearing to consider the Motion and any
objection, for July 27,2012 at 1:00 p.m.
LIMITED OBJECTIONS
10. The Committee generally consents to the relief requested in the Motion to the
extent that the Assessment funds (including pursuant to any audit not stayed by operation of
section 362 of the Bankruptcy Code) in the Debtor's possession are trust funds held for the
benefit of taxing authorities. The Committee generally consents to the relief requested in the
Motion to the extent that the Assessments would, if not paid, be entitled to priority. The
Committee also generally consents to the extent that the necessity of payment doctrine truly
applies with respect to any particular Assessment or authority, i.e., that the authority has an
unstayed right to redress against the Debtor (such as the imposition of liens), to discontinue or
refuse to issue any permits, licenses or authorizations to do business, that may reasonably be
anticipated to have a material adverse effect on the Debtor or its estate.
11. However, the Committee objects that the Motion contains woefully inadequate
details and disclosures for the Committee and other parties in interest to make these
determinations. Without disclosure of the Authorities, and the nature of the Assessments,
licenses and permits involved, it is simply impossible for the Committee to determine whether
any of the stated justifications do, in fact, apply.
12. It appears that not all of the Assessments are trust funds. Some may be entitled to
priority, but not all tax obligations, and not all penalties, are entitled to priority status under the
Bankruptcy Code. See 11 U.S.C 507(a)(8); In reBates, 974 F.2d 1234 (10
1
h Cir. 1992). As to
licensing, permitting and other non-tax Assessments, as well as the necessity of payment
doctrine, the Debtor's justifications only apply where the Debtor can demonstrate not only that
the license or permit (or goods or services) in question is necessary or critical to the estate, but
615483.1 7113/12
4
also that, unless payment of the pre-petition claim is made, the authority (or creditor I vendor)
would be in a position to implement an immediate (unstayed) sanction against the Debtor, such
as legally refusing, terminating, or revoking the license, permit or other goods or service in
question. In re Lehigh & New England Railway Co., 657 F.2d 570, 581 (3d Cir. 1981) (stating
that court may authorize payment of pre-petition claims when there "is the possibility that the
creditor will employ an immediate economic sanction, failing such payment"); In re Penn
Central Transp. Co., 467 F.2d 100, 102 n.l (3d Cir. 1972) (holding that the necessity of payment
doctrine permits "immediate payment of claims of creditors where those creditors will not supply
services or material essential to the conduct of the business until their pre-reorganization claims
have been paid").
13. It may be that the Debtor's justifications apply in each instance, but it similarly
may not be the case as to any particular Assessment or authority. Without any disclosure of the
authorities and the nature of the Assessments in question, the Committee cannot determine which
is the case.
14. This concern is amplified where the Debtor's justification is simply that if it does
not pay the Assessments, then its officers or directors may be held to be personally liable. While
it is true that, in some extraordinary circumstances, the automatic stay can be extended to protect
non-debtor officers and directors where a determination of liability would effectively constitute a
determination against the Debtor, the Committee is aware of no doctrine or authority that
provides that a bankruptcy estate may pay pre-petition claims outside of a chapter 11 plan simply
because the debtor's officers or directors might otherwise be held responsible. Moreover,
whether such individual liability to any given Assessment would reasonably arise, and if so,
whether such liability would rise to the level of an untenable distraction must depend on the
615483.1 7/13/12
5
specific circumstances. These matters cannot be established through mere generalized,
conclusory allegations.
15. Accordingly, the Motion should be denied, at least pending further disclosure and
supplementation by the Debtor of the matters raised herein.
Dated: July 13, 2012
615483.1 7113/12
SAUL EWING LLP


222 Delaware Avenue, Suite 1200
P.O. Box 1266
Wilmington, DE 19899
Telephone: (302) 421-6840
Facsimile: (302) 421-5873
E-mail: mminuti@saul.com
-and-
MUNSCH HARDT KOPF & HARR, P.C.
Russell L. Munsch
Texas Bar No. 14671500
Joseph J. Wielebinski
Texas Bar No. 21432400
Jay H. Ong
Texas Bar No. 24028756
3800 Lincoln Plaza
500 N. Akard Street
Dallas, TX 75201-6659
Telephone: (214) 855-7500
Facsimile: (214) 978-4335
E-mail: rmunsch@munsch.com
E-mail: jwielebinski@munsch.com
E-mail: jong@munsch.com
Proposed Counsel for the Official Committee of
Unsecured Creditors
6
I
I
I
I
In re:
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
Chapter 11
CORDILLERA GOLF CLUB, LLC, Case No. 12-11893 (CSS)
Debtor.
CERTIFICATE OF SERVICE
I, Mark Minuti, hereby certify that on July 13, 2012, a copy of the foregoing Limited
Objection of the Official Committee of Unsecured Creditors to Debtor's Motion for Order
Pursuant to Sections 105(a), 363(b), 541, and 507(a)(8) of the Bankruptcy Code
Authorizing (I) Payment of Certain Prepetition Taxes and Fees, and (II) Financial
Institutions to Process and Cash Related Checks and Transfers was served on the parties on
the attached service list in the manner indicated therein.
Dated: July 13, 2012
615483.1 7/13/12
SAUL EWING LLP
B y : ~ ----.....,
Mark Minuti (No. 2659)
222 Delaware Avenue, Suite 1200
P. 0. Box 1266
Wilmington, DE 19899
(302) 421-6840
CORDILLERA GOLF CLUB, LLC
Service List
Via Hand Delivery:
Michael R. Nestor, Esquire
Joseph M. Barry, Esquire
Donald J. Bowman, Esquire
Young Conaway Stargatt & Taylor LLP
Rodney Square
1000 North King Street
Wilmington, DE 19801
Mark Kenney, Esquire
Office of the United States Trustee
J. Caleb Boggs Federal Building
844 King Street, Suite 2207
Wilmington, DE 19801
Mark D. Collins, Esquire
Zachary I. Shapiro, Esquire
Richards, Layton & Finger, P.A.
One Rodney Square
920 N. King Street
Wilmington, DE 19801
Tobey M. Daluz, Esquire
Joshua E. Zugarman, Esquire
Ballard Spahr LLP
919 N. Market Street, 11th Floor
Wilmington, DE 19801
Damien Tancredi, Esquire
Cozen O'Connor, PC
1201 N. Market Street, Suite 1400
Wilmington, DE 19801
William P. Bowden, Esquire
Ricardo Palacio, Esquire
Ashby & Geddes, P .A.
500 Delaware avenue, 8th Floor
P.O. Box 1150
Wilmington, DE 19899
615483.1 7113/12
Matthew P. Ward, Esquire
Ericka F. Johnson, Esquire
Womble Carlyle Sandridge & Rice, LLP
222 Delaware Avenue, Suite 1501
Wilmington, DE 19801
Richard W. Riley, Esquire
Duane Morris LLP
222 Delaware A venue, Suite 1600
Wilmington, DE 19801-1659
Ellen W. Slights, Esquire
United States Attorney's Office
District of Delaware
1007 N. Orange Street, Suite 700
P.O. Box 2046
Wilmington, DE 19899-2046
Via Electronic Mail and First Class Mail:
Erika L. Morabito, Esquire
Brittney J. Nelson, Esquire
Foley Lardner LLP
3000 K Street, N.W., Suite 600
Washington, DC 20007
Christopher Celentino, Esquire
Mikel Bistrow, Esquire
Dawn Messick, Esquire
Foley Lardner LLP
402 W. Broadway, Suite 2100
San Diego, CA 92101
Carl A. Eklund, Esquire
Ballard Spahr, LLP
1225 17th Street, Suite 2300
Denver, CO 80202
I
I
Vincent J. Marriott, III, Esquire
Sara Schindler-Williams, Esquire
Ballard Spahr, LLP
1735 Market Street, 51st Floor
Philadelphia, PA 19103
David L. Lenyo, Esquire
Garfield & Hecht, P.C.
601 East Hyman A venue
Aspen, CO 81611
James J. Holman, Esquire
Duane Morris LLP
30 South 17th Street
Philadelphia, P A 19103
Arthur J. Abramowitz, Esquire
Cozen O'Connor, PC
Libertyview, Suite 300
457 Haddonfield Road
Cherry Hill, NJ 08002
Brad W. Breslau, Esquire
Cozen O'Connor, PC
707 17th Street, Suite 31 00
Denver, CO 80202
Melissa Maxman, Esquire
Ronald Wick, Esquire
Cozen O'Connor, PC
1627 I Street, NW, Suite 1100
Washington, DC 20006
Harlan W. Robins, Esquire
Dickinson Wright PLLC
15 N. 4th Street
Columbus, OH 43215
Kristi A. Katsma, Esquire
Dickinson Wright PLLC
500 Woodward Avenue, Suite 4000
Detroit, MI 48226
615483.1 7/13/12
2
Garry R. Appel, Esquire
Appel & Lucas, P.C.
1660 17th Street, Suite 200
Denver, CO 80202
Peter A. Cal, Esquire
Mark L. Fulford, Esquire
Sherman & Howard L.L.C.
633 17th Street, Suite 3000
Denver, CO 80202
MichaelS. Kogan, Esquire
Kogan Law Firm, PC
1901 Avenue ofthe Stars, Suite 1050
Los Angeles, CA 90067
I